Taiwan and the United States are expected to sign a military contract next month as part of the $5.8 billion arms sales that had irked rival China, media reported Monday.

The United States announced in September that it would equip Taiwan's ageing US-made F-16 A/B jets with new technologies, in a deal which fell short of the island's fervent wish for 66 new and more powerful F-16 C/Ds.

Among the equipment to be upgraded is a new advanced radar -- Active Electronically Scanned Array -- which allows aircraft to broadcast powerful signals while still remaining undetected, the United Evening News said.

The United States has quoted a price of $600 million for the radars, it said, adding that Taiwan may finish the signing of the contract before July 26.

The defence ministry declined to comment on the report.

The air force said in a statement last month it had received a "letter of answer" from Washington and was screening the items and prices listed.

China had expressed "great indignation" over the arms deal, summoning the US ambassador and warning the move would undermine relations between the two world powers and affect ties with Taiwan.

Taiwan's defence ministry has said the proposed upgrade, which will take 12 years to complete, would give its F-16 A/Bs a significant boost.

The jets will be equipped with radar capable of detecting Chinese stealth aircraft and may also be armed with precision munitions, according to the ministry.

Ties with Beijing have improved since Ma Ying-jeou of the China-friendly Kuomintang party came to power in 2008 on promises of ramping up trade and tourism links with China.

Ma was re-elected in January for a second and final four-year term.

But Beijing has refused to renounce the use of force against Taiwan even though the island has ruled itself for more than six decades since they split in 1949 at the end of a civil war.